DEL.ICIO.USMETRO ATLANTA FORECLOSURES
Real estate investors decry four-loan limit
New rule restricts number of loans backed by Fannie Mae, Freddie Mac
The Atlanta Journal-Constitution
Friday, December 05, 2008
Atlanta-area real estate investors, like their counterparts around the country, say a new four-loan limit is keeping good buyers away from foreclosed properties — and could actually prolong the recession.
The new policy, which limits to four the number of real estate loans by one person that will be backed by mortgage giants Freddie Mac and Fannie Mae, has spread to most local and national lenders. Experienced investors, frustrated and angry, complain the limits prevent them from buying bargain homes and possibly helping resolve the mortgage crisis.
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“How does it affect us? We’re paralyzed,” said Joe Ard, a Peachtree City investor who also runs Vestlet.com, a Web site that identifies properties for other investors. “I don’t need Big Brother watching me. I’ve got 19 houses. I’m making payments on them.”
The new policy, which went into effect Dec. 1, was designed to keep small-time investors from getting in over their heads and losing numerous rental properties to multiple foreclosures. The previous 10-loan limit was easier to get around, investors say.
The hard four-loan limit has no exceptions for income, credit status, assets or history of success as a real estate investor.
Ard says that restricts good investors — the most likely buyers for most foreclosures — from helping to turn around the foreclosure mess.
“The people who are going to pull us out of this are investors,” he said, “and we can’t help.”
Other Atlanta real estate investors agree the stricter rules will extend the current crisis by keeping foreclosures on the market longer and drive down home values.
“The four-house rule is going to keep us in a recession longer,” said Tom Hutchens, a Dunwoody mortgage broker and real estate investor. “It’s going to keep qualified buyers out of the market.”
Hutchens said three years ago he was making investor loans at 95 percent or more of the market value. At the same time, banks could not count the mortgage against the credit of the investor if he or she presented a contract to rent the property and cover the note. Those contracts were easily manufactured and not closely checked by loan officials, he said.
“I’m not going to say it was fraud,” Hutchens said, “but it was very loose.”
Banks now demand at least 20 percent down for investor loans, strict appraisals and are refusing to count up-front contracts as income to pay them off. They no longer allow cash-out refinances on the day of closing. Fannie Mae and Freddie Mac both now require at least a six-month wait before a reappraisal and refinancing to pull out cash.
Investors argue those reforms should be enough to ensure that loans go to quality investors.
They complain that limiting the number of loans keeps well-heeled investors — folks the government should be encouraging to buy houses during the downturn — from snapping up the bargain houses that are driving down values all over metro Atlanta.
John Adams, a real estate investor who owns dozens of homes and advises others through seminars, newsletters, a radio show, a Web site and a column in The Atlanta Journal-Constitution, said the limit has kept him from buying. He said he’s not willing to go to hard-money lenders or put up his own cash to buy houses.
“I’m sitting here as an observer,” said Adams. “I ought to be putting people to work.”
John Clark, an investor who lives in Dacula, said he’s trying to work around the limit by enticing private investors to put up money for house flips and rentals. Cash purchases aren’t covered by the rule.
Still, he’s unhappy about being unable to get a loan.
“If you are a full-time investor with good assets and documentation, ” Clark said, “you ought to be able to get a good loan. They have absolutely locked down the good group because of the bad. There are a lot of good investors out there.”
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May 10, 2009 1:06 PM | Link to this
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By John Mitchell
Mar 9, 2009 2:01 PM | Link to this
Damn Right (To this article)!!!!!!!!!!!!!!!!!!!!!! You took the words right out of my mouth. Strterhomerentals.com
By Jeff Sargo
Feb 11, 2009 4:55 PM | Link to this
The "easy" times we have just gone through have left us with a whole "generation" of lazy, gutless, ignorant & incompetant bankers-from the loal loan officers right up to board rooms of the big guys! They don't know how to and can't/won't take an action other than CYA. They are not intelligent/skilled enough to actually do the legitimate underwriting and actually evaluate risk. They are used to fitting every loan into the "confroming" box, poeddling it to Fannie Mae or Freddie Mac (thanks to the Community Reinvestment Act) and not having to do any thinking. Most of them can't do a legitimate evaluation of an investor because they have never had to during their "only through the recent good times" careers.
As we all know, the housing market can't recover until the demand for housing exceeds the supply. As long as we have glut of foreclosures sitting on the market at below replacement costs, the supply by definition exceeds the demand and the housing market can't recover. It's a great opportunity for first time homebuyers, but most are not savvy enough to deal with the foreclosure market and most don't have the ability to do the fix up that most foreclosure houses require before they are finaceable. The first time home buyers are also scared to death by everything they're hearing from the media and the new administration. They are not the solution to the over supply.
The logical way to clean up the low priced inventory on the market is to open up that market to qualified investors by eliminating all loan limits for qualified investors. This would simultaneously put a lot of construction workers to work fixing up these houses. It looks like a good idea to say "buy them 100% cash" but this just slows the process of cleaning this mess up. A qualified investor could buy 5 houses at 20% down versus one for cash. This would clean up the mess five times as fast!!!! Enabling experienced, qualified investors with a proven track record of managing multiple rental properties would go a long way towards helping the housing industry recover.
Until the prices get back up some, the appraisers can't find comps to justify "real" sales for the non-floreclosure market. Qualified, legitimate buyers are being turned away every day now because appraisers can't find comps-so much for the first time home buyers in the normal market. Until most of the foreclosures are off the market this isn't going to improve. Free up the investors to clean this mess up!
Until the prices get back up near replacement cost, we're not going to build much either. We can plan on a continued disaster in construction employment until the foreclosures are off the market and the market gets somewhat healthy again.
The beauty of this (freeing up the invetors to clean up the mess) is that it doesn't cost a think-just change the regulations!!! No $800 billion or anything!
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Jan 28, 2009 4:31 PM | Link to this
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By Linda
Jan 13, 2009 12:28 PM | Link to this
We can't even refinance what we own now except primary residence due to the FNMA/Freddie rule limiting to 4 properties. If we can't refinance and free up some money, we can't buy buy a car, tv, redecorate or hire a worker. It is a ripple and the waves have stopped! We have 8 loans total and excellent credit.
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Dec 22, 2008 1:41 PM | Link to this
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By Joshua Blank
Dec 10, 2008 3:48 PM | Link to this
For more information on foreclosures check us out at www.wreckstoriches.com
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